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Accounts Payable Policy: What Is It, Best Practices, and an Example Template

Mary Girsch-Bock — Thu, 01 Jun 2023 12:18:20 +0000

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More Customers

Download a free copy of "Preparing Your AP Department For The Future", to learn:

How to transition from paper and excel to eInvoicing.
How AP can improve relationships with your key suppliers.
How to capture early payment discounts and avoid late payment penalties.
How better management in AP can give you better flexibility for cash flow management.

Download Free Copy

Accounts Payable Policy: What Is It, Best Practices, and an Example Template

Written by Mary Girsch-Bock
20 min read

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What Is an Accounts Payable Policy?
What Are the Functions of Accounts Payable?
What Is the Typical AP Process?
What Are Internal Controls for Accounts Payable?
What Is an Accounts Payable Write-Off Policy?
Best Practices for Creating an Effective Accounts Payable Policy & Procedures Manual
Accounts Payable Policy Template
Steps to Create an AP Policy and Procedure Manual
What Should be Included in Your Accounts Payable Policy and Procedures Manual
Accounts Payable Best Practices for Your Business

Creating and having staff adhere to set policies helps establish guidelines for completing tasks by setting parameters that can be useful for business operations.

That’s why creating and maintaining a consistent accounts payable policy is so important to your business.

Setting accounts payable policies can help ensure that consistent policies are used across the board.

A comprehensive accounts payable manual can also serve as a training document for new employees and can easily answer routine questions staff may have throughout the AP process.

What Is an Accounts Payable Policy?

An accounts payable policy is the guidelines that are put into place to ensure that AP processing is completed on time and accurately.

Accounts payable policy looks at all aspects of your current AP system and creates a policy around those procedures.

For example, an AP policy may state that all invoices need to be approved by two employees or that invoice discrepancies need to be handled by a specific designee.

What Are the Functions of Accounts Payable?

The primary function of the AP department is to review, manage, and pay for goods and services received from vendors and suppliers in a timely manner.

But the accounts payable department is also responsible for finding new vendors and suppliers, vetting them, and maintaining a good business relationship with them.

Accounts payable is also responsible for providing accounting with all necessary AP reports.

Finally, the account payable department is responsible for ensuring that all original invoices match purchase orders and shipping receipts.

What Is the Typical AP Process?

The typical basic accounts payable process consists of four steps:

Receiving the supplier or vendor invoice
Reviewing the vendor name, account number, and invoice number for accuracy and completing the three-way match process if using a purchase order or procurement system
Approving the invoice for payment
Paying the invoice

If you’re using a procurement system, you’ll also want to include steps used in the procurement process as well, covering full cycle accounts payable.

What Are Internal Controls for Accounts Payable?

Internal controls for accounts payable cover four areas:

Obligation to Pay

Obligation to pay controls include purchase order approval and/or invoice approval, three-way matching, which matches invoice numbers, purchase order numbers, and shipping receipts, and regular auditing for errors and duplicate payments.
Data Entry

Date entry controls include when to record the invoice, invoice number guidelines, and proper recording of the expense in the appropriate GL account.
Invoice Payment

Established payment controls should always include separation of duties, manual check signing guidelines, tracking check numbers, and guidelines for storing checks securely.

Invoice payment guidelines should also include instructions for paying invoices electronically via ACH or wire transfer.
Fraud Controls

Many of the internal controls instituted in AP are designed to reduce payment fraud and procurement fraud.

Additional checks might include reviewing invoices with missing data more carefully and querying invoices from unrecognized email addresses.

Internal controls are important in AP, as they help to reduce fraud while streamlining the entire AP process. Establishing internal controls will also increase accuracy, minimize risk, and keep staff members accountable for their actions.

What Is an Accounts Payable Write-Off Policy?

Creating a policy for writing off accounts payable is important, as the International Financial Reporting Standards, or IFRS-9, lists two conditions when accounts payable may be written off.

Cancellation of Liability

If a vendor waives the outstanding AP balance or if contract terms have not been met, you are allowed to write off the balance owed to that vendor or supplier.

This is done by reducing the amount of the current AP balance by the amount canceled, with the same amount credited to Other Income.
Expiration of the Contract or Term

This will only occur when a contract or specific payment term is in effect.

Once the payment term passes, the AP balance can be credited back to other income in the same fashion as explained above.

Write-offs are usually done at the end of the fiscal year.

Best Practices for Creating an Effective Accounts Payable Policy & Procedures Manual

When creating an accounts payable policy and procedures manual for your business, there are several best practices that you should follow.

Fully Document Policies and Procedures

Simply telling staff members what they’re responsible for or how to perform job tasks is inadequate. All policies and procedures should always be in writing.
Share and Make Easily Accessible to Appropriate Staff

An AP policy and procedure manual should be shared with all new and current AP staff, and easily accessible, which means the manual can be shared as a printed document or as an electronic file.
Review and Update Regularly

It’s important that the accounts payable manual be a working document that is regularly updated at least once a year, or when there is a major change.

When creating a policy manual, it’s important that the manual reflects the actual accounts payable process used in your business, including step-by-step instructions and screenshots, when appropriate.

It’s always better to make the manual too detailed rather than not detailed enough.

Accounts Payable Policy Template

Starting from scratch with a policy can be a daunting task.

Often it is easier to work from an existing template and edit it to suit your own business.

It can then be improved and updated over time.

The Macomb Township Accounts Payable Policy and Procedure document is a good example of what a completed policy may look like for smaller businesses.

Larger businesses may be better served by creating a larger document using a template like this one from the State of Victoria in Australia, which provides a general structure for a manual, allowing you to delete the areas that don’t apply to your business.

Steps to Create an AP Policy and Procedure Manual

If the thought of creating a manual is overwhelming, following these steps can help guide you through the entire process from initial creation to distribution.

You can create your manual outline from scratch or use some variation of the sample outline below.

Overview
- Responsibilities
Approval Process
- Invoices
- PO
Receiving Documents
- How they are sent to AP
- How they are stored in AP
Mail (postal, email, and fax)
- Sorting
- Review
Invoice Processing
- Where invoices should be sent
- The AP process for entering, reviewing, and scheduling payment
- Three-way matching or alternatives
- Handling disputed invoices
- Handling non-PO invoices
Payments
- Checks
- Printing
- Signing
- Mailing
- ACH
Credit card payments
- Wire transfers
Payment Policy
- Timing
- Early payment discount
- Late payment fees
Duplicate Payments

Chart of Accounts
- General ledger Coding
- Responsibility for GL Coding
Month end Accruals

Vouchers/ Check request forms
- Payment requests and check requisitions
Handling Lost checks
- Issuing stop payments
- Handling un-cashed checks
Master Vendor Policy

Dealing with Customer Inquiries

Statements
- Policy regarding paying from statements
- Requesting and reviewing vendor statements
Reports
- For management reporting
- For departmental evaluation
- For the staff
Collecting Vendor Taxpayer Number Information
- Policy for requesting W-9
- Payments to independent contractors
- Use of TIN Matching
- Issuance of 1099s
- Information reporting (to IRS)
- 1042
Internal Controls

Recordkeeping
- Record retention policy
- Filing supporting documentation
Petty Cash
- Policy
Reimbursements
- Disbursements
- Reconciliation
Travel expenses and travel reimbursements

Sales tax

Policy and Procedures Manual
- Responsibility for
- Updates
- Communicating policy to all affected parties
Businesses can easily add or eliminate areas that do not apply to their business when creating the manual.
Review the template to see if any items need to be added or removed from the list.
Assign personnel such as the department head to complete different parts of the manual.
Set a deadline to review the entire document.
Review the completed document with the appropriate personnel for accuracy and to make any changes.
Once changes are made, save the document and distribute it as a printed copy or as an electronic file.
Plan on reviewing each calendar year or when any major changes are made in the department.

What Should be Included in Your Accounts Payable Policy and Procedures Manual

Whether you’re creating a manual from scratch or using a template, there are some topics that you’ll want to include in your AP Policy Manual.

These topics include the following:

Department Overview

The overview should always outline the department structure and provide a detailed list of positions and what each position is responsible for.
AP Responsibilities

AP responsibilities vary from company to company. It’s helpful for auditing purposes as well as for AP team members to know exactly what the department is responsible for.
Procurement Responsibilities

If your business uses a purchasing or procurement system, you should also clearly spell out exactly what procurement is responsible for. Also, what are the policies related to issuing purchase orders.

For example, if your procurement department is responsible for vendor selection and vetting, that should be spelled out in the policy. Likewise, if your AP department typically handles this instead.
Approval Process for Purchase Orders

If you use purchase order software, you’ll need to spell out the approval process for purchase orders.

Is it based on dollar amounts, or are there specific employees designated for purchase order approval? And if a purchase order is approved, does the invoice still need to be approved?
Approval Process for Invoices

Specify which employees are responsible for approving invoices, and the process for ensuring that invoices are routed promptly.
Invoice Processing

Invoice processing should include details on when an invoice is entered (before or after approval), when it’s sent for approval, and what needs to be in place before routing the invoice for approval.

Invoice processing should also include details on three-way matching, and steps for invoice processing without a purchase order.
Handling Disputed Invoices

Policy should always include who is responsible for investigation and follow-up if an invoice is incorrect or pricing or product receipt is disputed.
Payment Policies

Establishing payment policies is essential for any AP department, with a clear delineation of responsibilities outlined.
Early Payment Discount

If your vendors regularly offer you early payment discounts, determine a timeline for ensuring that the discount can be utilized.
Handling Lost and Uncashed Checks

All businesses should have a policy in place to handle lost or uncashed checks.

These policies can include establishing a minimum time frame before a stop payment is issued on lost checks.
Collecting and Managing Vendor Data

Specify who is responsible for locating and managing vendor relationships.

This includes requesting W-9s, the payment process for independent contractors, and the issuance of year-end 1099s.
Record Retention Policy

Create and maintain a policy for record retention. Do you keep two years of vendor information in the office and place older years in storage? Whatever your policy is, be sure to spell it out.
Reconciliation

AP accounts should be regularly reconciled for accuracy. Determine whether the process should be monthly, quarterly, or yearly and assign personnel to complete the job.

Accounts Payable Best Practices for Your Business

Your newly created accounts payable policy and procedure manual should always reflect best practices.

These best practices should include the following.

Simplify Workflows with AP Automation Software

Using AP automation in your business can help you streamline the entire AP workflow process from invoice receipt to payment.

And for businesses that need a better way to manage AP expenses, implementing a procure-to-pay software that incorporates AP automation software, like Planergy, can help.
Establish Internal Controls for Your Business

Internal controls such as three-way matching and separation of duties are essential components for managing your AP department.
Strategically Manage Payments

Instead of paying by invoice date, pay by invoice due date.

This will allow you to use early payment discounts and take advantage of 30 to 45-day payment due dates to better use your available cash.
Negotiate Terms and Prices with Vendors and Suppliers

If you have a good relationship with your business partners, they may be agreeable to better pricing or more lenient invoice payment terms.

It only takes a minute to ask, and you may be pleasantly surprised by the outcome.
Keep the Lines of Communication Open

Problems or concerns should always be addressed with your vendors.

If you know a vendor or supplier’s payment is going to be late, letting them know will be more beneficial to your business relationship than remaining silent.
Automate Wherever You Can

AP automation isn’t an either/or prospect. If you’re reluctant to automate your entire accounting department all at once, there are plenty of applications on the market that can help you with the automation process.

There are options including OCR readers for automating invoice processing to AI and machine learning applications that automate the three-way matching process, it’s okay to start slow. It’s more important to just start.
Continue to Review AP Accounts Regularly

Whether you’re using a completely automated accounting system or are still using a manual system, it’s important to review and reconcile AP accounts regularly.

Doing so will help you identify potential trouble spots and correct any errors sooner rather than later. Busier AP departments may want to consider implementing a regular accounts payable audit.

Having a Current Accounts Payable Policy and Procedure Manual is Essential

Whether you’re a small business with a two-page manual or a large operation with a comprehensive manual, having a working set of procedures in place is key for an efficient and well-organized accounts payable department.

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What’s your goal today?

1. Use PLANERGY to manage purchasing and accounts payable

We’ve helped save billions of dollars for our clients through better spend management, process automation in purchasing and finance, and reducing financial risks. To discover how we can help grow your business:

Read our case studies, client success stories, and testimonials.
Visit our Accounts Payable Automation Software page to see how PLANERGY can automate your AP process reducing you the hours of manual processing, stoping erroneous payments, and driving value across your organization.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Preparing Your AP Department For The Future”

Download a free copy of our guide to future proofing your accounts payable department. You’ll also be subscribed to our and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Accounts Payable Policy: What Is It, Best Practices, and an Example Template appeared first on Planergy Software.

Travel and Expense Management: What Is It, Challenges and Best Practices

Lyle Del Vecchio — Tue, 30 May 2023 12:42:42 +0000

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Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Download Free Copy

Travel and Expense Management: What Is It, Challenges and Best Practices

Written by Lyle Del Vecchio
16 min read

Expense Management Expense Reporting Process & Procedures

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What Is Travel and Expense Management?

Travel and expense management (TEM) is the process of streamlining an organization’s travel spending.

TEM encompasses everything from booking airfare and hotels to managing ground transportation and expenses.

An effective TEM solution will help an organization save money, time, and resources while providing visibility into spending patterns.

The goal of T&E management is to ensure that employees only spend money on essential expenses while on business trips.

There are many different aspects of T&E management, but some of the most important include the following:

Approving or denying employee travel requests;
Pricing and booking flights, hotels, and rental cars;
Managing corporate credit cards;
Submitting and approving expense claims;
Handling expense reimbursement;
Auditing expenses for compliance; and
Providing employees with guidance on company travel policies.

As you can see, a lot goes into managing business travel. But by implementing T&E management best practices, you can make the process simpler and more efficient.

Challenges of Travel and Expense Management

Employee Resistance to Change

One of the most common challenges businesses face when implementing a new T&E management strategy is employee resistance to change.

Let’s face it—most people don’t like change, and when it comes to something as personal as travel plans, that resistance can be even greater.

The key to overcoming this challenge is communication.

When introducing a new T&E management system, take the time to explain why the change is necessary and how it will benefit both the employee and the company as a whole.

If possible, allow employees to test the new system before it’s fully implemented.

This will allow them to get comfortable with it and provide feedback that can be used to improve the system before it goes live.
Lack of Visibility Into Spend

Another big challenge businesses face when it comes to travel expense management is a lack of visibility into spend.

This can happen for many reasons, but the most common is simply not having an effective system to track employee spending.

Without visibility into spend, it’s very difficult to control costs.

You may be able to save some money here and there, but you’ll never get a true picture of where your money is going and how you can save more.

Implementing an automated travel and expense management solution is the best way to overcome this challenge.

With such a solution, you’ll always have visibility into employee spending, no matter where they are in the world, for more efficient spend management.
Manual Processes

Many small businesses have a limited technology budget, many rely on manual processes, specifically spreadsheets, to track their data.

In the beginning, spreadsheets may seem like an efficient way for finance teams to track employee spending, but they quickly become unmanageable as your business grows.

Not only that, but manually inputting data into spreadsheets is time-consuming and error prone.

The best way to overcome this challenge is to automate as much of the process as possible.

By implementing an automated travel and expense management solution with approval workflows, you’ll be able to eliminate manual processes and free up your employees’ time so they can focus on more important tasks.
Lack of Policy Enforcement

Another common challenge businesses face when managing travel and expenses is a lack of policy enforcement.

This can happen for several reasons, but the most common one is that businesses don’t have clear policies around expenses.

Without clear policies, employees are free to spend whatever they want, whenever they want, with no consequences.

This can quickly lead to uncontrolled spending, which can strain your business’s budget.

The best way to overcome this challenge is to create clear policies around travel and business expenses, including details about expense approval and the reimbursement process, and enforce them strictly.

Defining what can be an expense and what requires pre-approval as a purchase order will be an important part of any policy.

A separate purchase order policy can be defined for those scenarios.

By defining your policies, you’ll be able to control costs and keep your budget healthy.
Filing Expense Reports

Filing expense reports can be time-consuming and tedious—but it doesn’t have to be! With the right tools, you can automate the process so that all you have to do is snap a picture of your receipts, and they’ll be filed away automatically.

Using this approach creates a better user experience for everyone in the company.
Dealing with Reimbursements

If your company reimburses employees for their travel expenses, you’ll need a system to process those reimbursements quickly and efficiently.

Otherwise, employees may be left waiting weeks (or even months!) for their reimbursement check to arrive in the mail.
Fraud and Misuse

Fraud and misuse of travel and expense management systems can be a major issue for your company, and it can result in significant financial losses.

Employees can misuse company funds by submitting false expenses or using company funds fraudulently for personal trips.

To prevent fraud and misuse, organizations need to implement measures to detect and prevent fraudulent activities.

This includes audits, expense policy enforcement, employee training, and automated systems to flag potentially fraudulent expenses.

It is also important to have clear policies regarding the use of company funds and to communicate them effectively to all employees.
Integration with Other Systems

Travel and expense management systems must integrate with other systems, such as your ERP, accounting and payroll, to ensure accurate and timely expense reporting and reimbursement.

Integration with other systems can help reduce errors and increase efficiency by automating data transfer between systems.

This can include automatically generating invoices, updating accounting records, and processing payroll.

Integrating travel and expense management systems with other systems can also provide real-time insights into expense data, allowing organizations to identify trends and optimize spending.
Employee Satisfaction

While managing travel and expenses, it is essential to ensure that employees are satisfied and engaged with the process.

Lengthy approval processes, delayed reimbursement, and unclear policies can lead to employee frustration and dissatisfaction.

This can ultimately impact employee productivity and engagement.

You must ensure that the travel and expense management process is user-friendly and easy to use.

This can include providing employees with clear policies and guidelines, using mobile apps for expense reporting, and streamlining the approval process.

Providing employees with real-time access to expense data can also help increase their satisfaction by giving them more control over their expenses and reducing delays in reimbursement.

Start by developing processes, then evaluate solutions to help support those processes. Ask for employee feedback during the entire process.

Benefits of Effective Corporate Travel Management

Cost Savings

Cost savings is one of the most significant benefits of travel and expense management.

By managing travel expenses effectively, organizations can reduce expenses, identify areas for cost-cutting, and optimize their travel spend.

Effective travel and expense management can help organizations negotiate better rates with travel vendors and reduce the incidence of fraudulent expenses, leading to substantial savings over time.
Improved Compliance

Travel and expense management systems can help organizations ensure compliance with company policies and regulatory requirements.

By automating expense policies, organizations can ensure that expenses align with company guidelines and that all necessary approvals and receipts are obtained.

This can help minimize the risk of non-compliance and reduce the likelihood of legal or financial penalties.
Increased Efficiency

Travel and expense management systems can automate manual processes, such as data entry and approvals, leading to increased operational efficiency and productivity.

This can free up employees’ time to focus on other tasks and reduce the risk of errors and delays in processing expenses.

Automated systems can also provide real-time insights into expense data, allowing organizations to identify trends and optimize spending quickly.
Improved Visibility

Effective travel and expense management can give organizations greater visibility into their expenses.

This can help identify areas for cost-cutting and optimize spending.

Greater visibility can also help organizations negotiate better rates with travel vendors and ensure they get the best value for their money.
Better Employee Experience

A well-managed travel and expense management process can help improve the employee experience by reducing the administrative burden of managing expenses and providing timely reimbursement.

This can lead to greater employee satisfaction and engagement, ultimately benefiting the organization.

Best Practices for Travel and Expense Management

Create a Central Repository

Having all your travel and expense information in one place will make it much easier to keep track of.

Expense management software generally includes document storage to make it easier to manage all aspects of your travel program.

Use it to store travel booking confirmations, corporate card statements, transaction receipts, and more.
Establish Policies and Procedures

Before employees start booking travel, ensure they’re aware of your company’s policies regarding travel expenses.

Will you reimburse for airfare, hotels, meals, etc.? What types of expenses need to be pre-approved? Will you require the use of a corporate card or can they use a personal card? Will you issue virtual cards for them to use?

Having clear guidelines in place can avoid any confusion or misunderstandings down the road.
Encourage Employees to Use Company Cards

If your company offers corporate credit cards, encourage employees to use them for all business-related travel expenses.

This will not only help keep track of expenses but can also help earn rewards like points or cash back.
Review Expenses Regularly

Set aside time each week or month to review submitted expense reports. This will ensure that all employee expenses are accounted for and that there are no discrepancies.

If you catch an error or discrepancy, be sure to follow up with the employee right away.

Manage Your Travel and Expense Program with Planergy

Overall, travel and expense management is fundamental to any successful business.

It requires hard work and dedication to maintain visibility into spending and keep costs under control.

While there is no ‘one size fits all’ approach to travel and expense management, businesses should look to select a strategy that best meets their organization’s needs.

A dedicated travel and expense software, like Planergy, will have flexibility and control to match your needs.

Regardless of the approach taken, travel spends should be closely monitored throughout the year in order to remain compliant with internal and external policies while ensuring that more money remains in the bank.

When it comes to travel and expense management, planning ahead is key.

Adopting best practices can help reduce overhead costs quickly — setting the groundwork for long-term fiscal success.

Download PDF

What’s your goal today?

1. Use PLANERGY to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our Purchase Order Software page to see how PLANERGY can digitize and automate your purchase order process saving you time and money.
Learn about us, and our long history of helping companies just like yours.

2. Download our “Indirect Spend Guide”

Download a free copy of our guide to better manage and make savings on your indirect spend. You’ll also be subscribed to our and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Travel and Expense Management: What Is It, Challenges and Best Practices appeared first on Planergy Software.

Invoice Cycle Time: What Is It and How To Improve It

Mary Girsch-Bock — Fri, 26 May 2023 09:46:31 +0000

Clients and results

More Customers

Download a free copy of "Preparing Your AP Department For The Future", to learn:

How to transition from paper and excel to eInvoicing.
How AP can improve relationships with your key suppliers.
How to capture early payment discounts and avoid late payment penalties.
How better management in AP can give you better flexibility for cash flow management.

Download Free Copy

Invoice Cycle Time: What Is It and How To Improve It

Written by Mary Girsch-Bock
16 min read

AP Automation Benchmarking KPIs

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What Is the Invoice Cycle Time?

Invoice cycle time is the number of days it currently takes your accounts payable department to process an invoice once it’s been received.

The processing tasks measured in invoice cycle time include:

Invoice Receipt

Once the invoice is received, how long does it take to get the invoice to the right place?

If you’re using an automated AP application, invoice receipt is quick and painless, automatically moving from one step to the next without much human intervention needed unless there’s an exception found.

However, if you’re manually processing your invoices, how quickly the invoice moves to the next step depends greatly on how it’s delivered.

Mailed invoices need to be routed to the correct individual, and if they’re emailed, they’ll need to be printed for processing.
Invoice Validation

Once an invoice has been received, it needs to be verified.

The best way to verify an invoice is by using the three-way match, which matches an invoice to a purchase order and delivery receipt.

If a purchase order was not used, you’ll have to verify its authenticity in another way.
Invoice Approval Preparation

Once an invoice has been authenticated and there are no exceptions found, the invoice will need to be approved.

If you’re using an automated purchase order system, approval may not be necessary, since the purchase order was approved.

However, invoices without a corresponding purchase order will need to be approved.

The approval process is what typically pushes the invoice cycle time up.

The manual approval process is ripe for bottlenecks, including invoices getting lost or misplaced during the routing process.

In theory, while an invoice should be quickly approved, the reality is that an invoice, routed manually, can often remain on an approver’s desk for days or even weeks.

And for invoices that need a second approval, such as those over a certain dollar amount, approval time can quickly rise.
Invoice Payment

Once an invoice is routed back to AP after approval, it will need to be entered into your accounting software application, where it is scheduled for payment.

If you’re using a manual AP system, the invoice will need to be entered into your accounting application.

Data entry is not necessary with an automated AP system, which will integrate with your accounting software or ERP and process the invoice ready for payment immediately upon approval.

How Do You Calculate Invoice Cycle Time?

It’s a fairly simple process to calculate your invoice cycle time by determining the number of days required to complete the steps listed above.

Manual Invoice Cycle Time

Invoice Cycle Task	Days to Complete Cycle
Invoice Receipt	1-2 days
Invoice Validation	1-2 days
Invoice Approval	4-7 days
Invoice Payment Preparation and Data Entry	1-2 days
Total Invoice Cycle Time	7-13 days

In the example above, a company using manual AP processes may spend between 1-2 days getting the invoice to where it’s supposed to go.

This can include copying an invoice that is emailed or routing the invoice to the correct staff member.

Invoice validation may also be fast, at one day, or expand to two days if an exception is found, or matching documents need to be located.

However, if a purchase order to shipping receipt has not been received, processing times can rise.

Invoice approval time can vary widely depending on internal processes in place for approving invoices.

Finally, invoice payment preparation should only take one day, but if there are numerous invoices that need to be entered, additional time may be needed. That puts your average manual invoice cycle time at 7-13 days.

Automated Invoice Cycle Time

Invoice Cycle Task	Days to Complete Cycle
Invoice Receipt	1 day
Invoice Validation	1 day
Invoice Approval	1 day
Invoice Payment Preparation and Data Entry	½ day
Total Invoice Cycle Time	3½ days

For our second example, a company using invoice automation, invoice cycle times are reduced dramatically.

Since an automated AP system receives an invoice and automatically performs a three-way match, the invoice can be routed for approval almost immediately, using a custom workflow approval process.

Once approved, the invoice is ready to be paid.

While these are just examples, both examples fall within the range cited by Ardent Partners State of ePayables for 2022, which estimates manual cycle times of 10.9 days versus automated processing times of 3.7 days.

What Is the Average Invoice Cycle Time for a Typical Company?

According to the American Productivity and Quality Center (APQC) metrics, best-in-class companies have an average invoice cycle time of 2.8 days, with a median time of 4 days, with those on the bottom of the list taking 7 days or longer from invoice receipt to payment setup.

How Does a Poor Invoice Cycle Time Impact a Company?

Higher processing cost is the number one way that poor invoice cycle times can impact a business. It may be a well-worn cliché, but time is money.

And the more time you spend processing invoices, the more it’s going to cost you; in additional labor hours, the loss of early payment discounts, and fees and penalties due to late payments.

If your invoice cycle time is high, it’s likely due to the use of manual processes.

Every hour spent copying an invoice for distribution, performing a manual three-way match, or entering invoice data manually is costing your company money.

Add to that the days or possibly weeks that an invoice sits on someone’s desk waiting to be approved, and your costs can quickly become unsustainable.

What Are the Challenges With Invoice Processing?

The biggest challenge businesses face with invoice processing is delays, since delays cost your business money.

The delays can start at the beginning when the invoice is received.

If you’re not currently using e-invoicing, chances are that you’re still receiving paper invoices in the mail.

But even if your invoices are being emailed to you, if you’re not using an automated system, you still have to download and print those invoices and make sure that they get to the correct AP team member.

Next, when an invoice is received, it has to be validated for authenticity.

Following that, AP staff will need to complete three-way matching, which ensures that the invoice data matches the same data found on a purchase order and shipping receipt.

If there’s a discrepancy, you’ll have to pull the invoice and complete some follow-up work to determine which documents are accurate.

Finally, the biggest challenge with invoice processing is timely invoice approvals. With a manual system, even if the invoice is routed for approval immediately, there are often significant delays in the approval process.

And once the invoice has been approved and is routed back to AP, clerks will still have to enter the invoice manually.

How Can you Improve Invoice Cycle Times?

If your invoice cycle time is greater than seven days, it may be time to work on creating internal processes that can improve that time.

Remember, the higher your invoice cycle time, the more inefficient your AP processes are.

While there are ways you can improve manual processes, the best way to improve your invoice cycle time is to make the switch to an automated AP application like Planergy, which uses a combination of artificial intelligence and machine learning to automate time-consuming manual tasks like the following:

Manual Data Entry

Entering invoice data can take up a significant amount of time. Automation eliminates the need to enter invoice data manually.
Approvals

Manually routing invoices for approval causes more processing delays than just about any other process.

Invoices routed for manual approval often sit on the approver’s desk for days, or even longer.

Manually routing an invoice also raises the possibility of it getting lost in transit, buried under stacks of paper, or being routed to the wrong person.

Using automated approval workflows gets the invoices where they need to go promptly, where they can be electronically approved and routed back to AP for quicker processing.
Three-Way Matching

An integral part of processing invoices is completing three-way matching. Three-way matching requires invoice data to match the corresponding purchase order and shipping receipt.

If an exception is found, additional follow-up is required. Using AP automation, three-way matching is completed automatically.

No more hunting down purchase orders and shipping receipts. And if there is an anomaly found during the automated matching process, the invoice is flagged for additional follow-up.
Storing Documents Digitally

When processing invoices an AP automation solution will automatically store and backup the documents.

With Planergy, this will include any relevant documents from the procurement process too – the PO, GRN, supplier quotes, etc.

Having documents available with powerful search functionality saves time manually storing the documents but also makes it easier to search for documents later.
Reduces Human Error

Accounts payable automation reduces the amount of human error occurrence. Reducing manual entry and repetitive tasks reduces the opportunity for errors.

Reducing errors helps to eliminate late fees and other penalties.
Identify Incorrect Payments and Fraud

Automation also reduces the possibility of accounts payable fraud, eliminates duplicate payments, and offers electronic document management, allowing you to go paperless (or close to it), while keeping files organized and easily accessible.

Finally, automation allows you to speed up your invoice cycle time, allowing you to take advantage of early payment discounts.

An investment in an automated procure-to-pay application allows you to streamline the entire AP invoice cycle from invoice receipt to payment preparation, giving your AP team more time to concentrate on more important tasks.

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What’s your goal today?

1. Use PLANERGY to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our Accounts Payable Automation Software page to see how PLANERGY can automate your AP process reducing you the hours of manual processing, stoping erroneous payments, and driving value across your organization.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Preparing Your AP Department For The Future”

Download a free copy of our guide to future proofing your accounts payable department. You’ll also be subscribed to our and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Invoice Cycle Time: What Is It and How To Improve It appeared first on Planergy Software.

Spend Management for QuickBooks Online

Mary Girsch-Bock — Thu, 25 May 2023 10:22:45 +0000

Clients and results

More Customers

Download a free copy of "Preparing Your AP Department For The Future", to learn:

How to transition from paper and excel to eInvoicing.
How AP can improve relationships with your key suppliers.
How to capture early payment discounts and avoid late payment penalties.
How better management in AP can give you better flexibility for cash flow management.

Download Free Copy

Spend Management for QuickBooks Online

Written by Mary Girsch-Bock
22 min read

AP Automation Procurement QuickBooks

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Purchase Order Creation in QuickBooks

Purchase order creation in QuickBooks Online is simple. Just go into the Vendor profile and click on the New Transaction tab which is on the right side of the screen.

Click on the Purchase Order option from the drop-down menu, and you’ll be able to add both category and item details to the purchase order.

The purchase order feature in QuickBooks Online is easily navigated.

Once the purchase order has been entered, you can send the purchase order electronically to your vendor or supplier for processing.

In QuickBooks Online, you can also update the purchase order status once an invoice has been received by copying the information to a bill for AP processing.

There is also an option to view all open purchase orders by running the Open Purchase Order List report, which can be run by product/service or by vendor.

One thing to note is that the purchase order feature in QuickBooks Online will need to be turned on. This can be done in the Settings area of the application.

For a small business this can work well. But as a company grows this will create a bottleneck with your accounting team because you won’t want all your staff to have access to QuickBooks and see your accounting data. QuickBooks does not have granular access controls.

Also, there are no purchase order approval workflows and other important functions for properly managing purchasing within a company.

Budgeting

Both QuickBooks Online Plus and QuickBooks Online Advanced offer basic budgeting options that can be useful for your finance team.

You have the option to use previous year totals or current year totals to prepare your budget.

Because QuickBooks Online uses accounts that are in your current chart of accounts, if you wish to add a particular account to your budget, you’ll first have to add the account to your chart of accounts.

The Budget feature lets you create a new budget for multiple fiscal years.

A Pre-fill data option lets you prefill a newly created budget using previous year or current year totals, and you have the option to subdivide the budget by customer if you desire.

You can create a budget for up to seven fiscal years, and have the choice to create a monthly, quarterly, or yearly budget.

If you subscribe to the Advanced plan, you can also import budgets as a .CSV file.

There’s also an option to copy an existing budget, which allows you to use last year’s financial data in your new budget.

Once a budget has been created, you can run either the Budget Overview report or a Budget vs. Actuals report so you can see how close your current totals are to your budgeted amounts.

The budgeting in QuickBooks Online can be beneficial from a reporting perspective but it will not restrict and control expenditure during the purchasing process and give you real-time budget vs expenditure data at the point of approving a purchase like Planergy, a dedicated spend management software that integrates with QuickBooks Online.

Invoice Processing

Invoice processing is simple in QuickBooks Online, but there is no real automation involved in the process.

For example, once you receive an invoice for a purchase, if the invoice matches the purchase order, you can change the status of the purchase order by converting it to a bill.

However, there is currently no option for an invoice to automatically connect with a purchase order.

Create a bill from scratch or upload an electronic invoice directly in QuickBooks Online.

If you have already created a purchase order for an expense, you can create a bill for that purchase order by choosing the Copy to Bill function, which will automatically close the purchase order.

A dedicated AP automation software that integrates with QuickBooks Online, like Planergy, can greatly improve invoice processing in QuickBooks.

This is achieved by automatically importing invoices, digitally archive them, scanning them using OCR and AI, automatically two- or three-way match the invoice against PO and GRN, flagging duplicate invoices, highlighting any differences between PO and invoice, and automatically routing invoices for approval.

Reducing manual steps and managing by exception greatly improves invoice processing time and reduces the cost of processing invoices.

Supplier and Vendor Management

Vendor management capability is decent in QuickBooks Online. You can add the usual contact information, including a billing address, by clicking on the Vendor Details tab.

To view all current supplier and vendor activity, click on the Transaction List option, which lists all current transactions related to a particular vendor including bills, purchase orders, and payments.

The Expenses option lets you manage all vendor activity from one screen.

One of the most useful features in QuickBooks Online is the ability to complete all related vendor activity from within the Vendors screen.

For example, if a vendor has an open bill, you can schedule it for payment directly from the Vendors screen.

You can also update the status of a purchase order from the Vendors screen, copying information over to a bill.

While this is extremely useful, unfortunately, it doesn’t lend itself to automating the AP/procurement process, since all of these updates will need to be entered manually.

A dedicated spend management platform, like Planergy, will add additional vendor management features. These include supplier approval, vendor performance management, vendor management KPI tracking, PunchOut catalog integrations, and reporting easily on vendor spend.

User Access Controls

QuickBooks Online allows you to add a new user to the system at any time. Unfortunately, there are only two levels of users available:

Standard Users

Standard users can be given full or limited system access.

Standard users with full access can view, add, and change information in both Customers and Sales and Vendors and Purchases.

This includes writing checks, making bank transfers, making deposits, and changing system preferences.

Those with limited access can perform most job functions, but cannot print checks, view bank registers, adjust inventory totals, view income and expense totals, or set up multicurrency options.

There is no option to customize which features and functions the system users can have access to.
Company Admin

Company Admins have complete access to all system features including sending money, changing passwords, and adding users.

New users can be given All, Limited, or No access in QuickBooks Online.

Two other types of access can be used that don’t count toward the number of current system users:

Reports Only

This designation allows employees to access standard financial reports while restricting payroll reports and those that contact personal information.
Time Tracking Only

If you use time-tracking, this designation allows employees to add their time sheets to the system.

While these options may be suitable for smaller businesses, larger businesses will likely need a more sophisticated way to assign access controls for their employees.

A separate spend management platform allows you to leave access to QuickBooks to the finance team while giving more granular controls around purchasing. For example, restricting access to view POs from just one department.

Reporting

For general financial reporting, QuickBooks Online offers solid reporting options.

For expense management purposes, those reports are limited to the following:

Open purchase order list
Open purchase order detail
Purchases by product or service detail
Purchases by vendor detail

Expense management reporting in QuickBooks Online is limited.

While there are several accounts payable and vendor reports available, the reports provide minimal information that can be useful for proper spend management.

A dedicated spend management software, like Planergy, can include deep reporting functionality for accounts payable and procurement with automated spend analysis.

Spend Management Best Practices

Spend management best practices are important for small and mid-size businesses.

These best practices include:

Automating workflows and removing manual tasks
Vetting and selecting vendors carefully
Procurement of goods and supplies at the best price for the best terms
Maintaining a good business relationship with vendors which should include regular communication
Taking advantage of early payment discounts when offered
Setting departmental and individual spending limits to stay within budget
Making sure that vendors and suppliers are always paid on time and accurately
Using analytics to make the best possible business decisions

Automation plays a key role in spend management best practices. For example, it’s difficult to pay vendors on time when invoices aren’t approved regularly.

It’s also difficult to have a complete picture of your finances when invoices are sitting on someone’s desk waiting to be approved.

When using manual AP systems, it can also be difficult to take advantage of early payment discounts.

That’s why it can be beneficial to your business to use a procure-to-pay application that integrates with accounting software applications like QuickBooks Online.

Use a Dedicated Spend Application with QuickBooks Online for Improved Spend Management

Using a dedicated spend application like Planergy can increase the effectiveness of your accounting software application while also automating much of the purchase order and accounts payable process.

For example, Planergy offers the following features that can significantly reduce or even eliminate data entry, provide real-time budget vs. actual reports, and true AP automation.

Two- and Three-Way Matching

While you can match a purchase order to an invoice in QuickBooks Online, the process has to be completed manually.

Using an application like Planergy, incoming invoices are automatically matched to shipping receipts and purchase orders using artificial intelligence and OCR technology.
Automated PO Processes

Instead of using a manual purchase order system, mapping Planergy to QuickBooks Online allows you to automate the entire purchase order process from the initial purchase request to automating the entire purchase order workflow process.

Using a procure-to-pay software application also allows you to better monitor spending while reducing time-consuming manual processes.

In addition, you can manage your purchases from initial request to approval, to payment, from any device or mobile app.
Purchase and Invoice Approval Workflows

One of the biggest issues that impact accounts payable is delayed approvals. Using a manual approval process, paper invoices are routed to approvers, where they can remain on a desk for days or weeks at a time.

Even if you receive invoices electronically through QuickBooks, those invoices will still need to be routed to approvers before they can be paid.

Using procure-to-pay software streamlines the approval process by using an automated approval workflow that eliminates the manual approval process.
Budgeting Controls

Planergy gives you real-time visibility of spend versus budget.

It can also restrict purchasing when you reach your budget requiring approval on a budget increase before further spend can be committed against the budget.

This gives you better information when approving POs while also having the ability to ensure you are staying within budget.
Supplier Relationship Management and Approvals

QuickBooks Online allows you to enter basic vendor details, but it’s impossible to adequately manage large numbers of purchases using QuickBooks applications alone.

But adding a procure-to-pay application like Planergy offers easy vendor onboarding with centralized data management capability that can support vendor systems and supply catalogs.

In turn, a better supplier relationship can also lead to better pricing and more flexible payment terms.
Spend Analytics

If you’ve ever wondered exactly what your business is spending its money on, having access to true spending analytics is vital.

While QuickBooks Online offers good standard reporting options, there’s little available that can help with true spend management.

On the other hand, procure-to-pay applications like Planergy offer real-time business intelligence reports and user dashboards that can be fully customized to suit the needs of your business and help turn data into actionable insights.

Unlike QuickBooks reports, procure-to-pay applications offer insight into spending levels and where you’re spending. You’ll also be able to track every purchase you make.
Accounts Payable Automation

While you can manage invoices in QuickBooks online everything is quite manual.

Planergy introduces AP automation to automatically scan and match invoices, automatically forward invoices for approval to the correct person, all while ensuring invoices are backed up digitally.
Accurate AP Reporting

Instead of waiting until a bill has been received or paid, using a procure-to-pay application allows you to view budget vs. actuals in real-time.

You’ll also have access to business intelligence reports while ensuring a quicker, more accurate month-end closing process which includes committed spend totals.
Granular User Access Controls

User access is an important part of any application. QuickBooks Online offers multi-level user access but fails to provide granular access control that keeps access to accounting data strictly to accountants.

A better solution is to use an application that offers granular user access controls, allowing authorized users to access procure-to-pay features without having complete access to accounting software applications.

As a result, AP and purchasing staff have easy access to the functions they need without access to confidential data such as payroll and bank account information.

For added security, things like two-factor authentication and the ability to set multi-level permissions based on roles help keep confidential information secure.

Have the Best of Both Worlds

QuickBooks Online is a great application for general accounting, but it offers little in the way of spend management capability.

But when coupled with an easily integrated, procure-to-pay application, like Planergy, you can continue to use the accounting software you’re comfortable with while bringing AP automation to your business.

With a procure-to-pay application, you can manage all of your purchase orders, from initial request to approval directly in the application, without the need to access QuickBooks Online.

In addition, procure-to-pay applications like Planergy offer AP automation such as three-way matching automation, with the ability to automatically import and generate bills in QuickBooks Online for all approved expenses.

Using an automated procure-to-pay application will allow you to reduce or even eliminate paper invoices, create an automated workflow approval system that ensures that invoices are promptly approved for timely payment, and eliminate the need for duplicate or repetitive data entry.

Using QuickBooks Online combined with a procure-to-pay application like Planergy can eliminate Excel spreadsheets, save time, and still provide the accounting capability your small business needs.

Download PDF

What’s your goal today?

1. Use PLANERGY to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our Accounts Payable Automation Software page to see how PLANERGY can automate your AP process reducing you the hours of manual processing, stoping erroneous payments, and driving value across your organization.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Preparing Your AP Department For The Future”

Download a free copy of our guide to future proofing your accounts payable department. You’ll also be subscribed to our and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Spend Management for QuickBooks Online appeared first on Planergy Software.

Accounts Payable: What Is It, Definition, Job Description, Process, and Software

Keith Murphy — Wed, 19 Apr 2023 11:16:29 +0000

Clients and results

More Customers

Download a free copy of "Preparing Your AP Department For The Future", to learn:

How to transition from paper and excel to eInvoicing.
How AP can improve relationships with your key suppliers.
How to capture early payment discounts and avoid late payment penalties.
How better management in AP can give you better flexibility for cash flow management.

Download Free Copy

Accounts Payable: What Is It, Definition, Job Description, Process, and Software

Written by Keith Murphy
32 min read

AP Automation Invoice Processing Process & Procedures

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What Is Accounts Payable?
Understanding Accounts Payable
Accounts Payable Example
Accounts Payable Job Description
The Accounts Payable Process
Other Important Accounts Payable Tasks
Challenges in the Accounts Payable Process
Benefits of Using AP Automation Software
Popular Accounting Software Options
Future Trends in Accounts Payable

What Is Accounts Payable?

Accounts payable is the money a company owes to its suppliers for goods and services received on credit.

Accounts payable is also the department within the finance team who are responsible for paying the invoices received from suppliers related to the company’s purchases.

From an accounting perspective, accounts payable is an account within the general ledger that tracks a company’s liabilities to pay short-term debt to it’s creditors.

Understanding Accounts Payable

When a company purchases goods and services on credit, it records them as accounts payable because they are liable to pay the vendor later.

Accounts payable is also sometimes referred to as trade debt or trade payables, but trade payables are actually a sub-set of accounts payable. Trade payables is related only to inventory related goods.

Is Accounts Payabale a Liability or an Asset?

Accounts payable is a current liability on the balance sheet that needs to be settled within one year, representing money owed to other entities in exchange for goods and services.

It should not be confused with accounts receivable, which refers to the money customers owe a business. This is an asset.

The accounts receivable ledger tracks these amounts owed and helps businesses keep track of payments due, monitor customer balances, and generate reports for accounting purposes.

AR is an important part of managing the finances of any business, but it can be considered as the opposite of AP.

What’s the Difference Between Accounts Payable and Notes Payable?

Accounts payable should also not be confused with notes payable.

Notes payable are long-term liabilities payable beyond 12 months while accounts payable should be payable within a 12-month period.

What’s the Difference Between an Accrued Expense and Accounts Payable?

Accrued expenses and accounts payable have some similarities, they are both monies owed for example, but there are also key differences between accrued expenses and accounts payable.

Accrued expenses are liabilities that have built up over time and the company is obligated to pay in the future. Invoices may not have been received yet and the amount owed may be estimated.

Accounts payable are liabilities related to ongoing expenses where invoices have been received and payment must be made in a defined period, usually within 12 months of the expense being incurred.

Is Accounts Payable a Credit or a Debit?

There is often confusion about if accounts payable is a credit or a debit. Accounts payable is a liability account and should have a credit balance.

But individual accounts payable records can be credit (at the point of purchase) or debit (when the payment is processed).

Accounts Payable Example

You make a purchase of $1,000 worth of stationary on behalf of the company from your supplier, AB Stationary.

Based on your agreed credit terms the purchase is on credit and will be due to be paid in 14 days.

This $1,000 will be added to your accounts payable ledger as a credit until against AB Stationary until the payment is processed.

When the payment is processed the accounts payable ledger will have a debit of $1,000 recorded.

This follows accrual accounting practices where expenses are recognized when they are incurred.

Accounts Payable Job Description

Working in accounts payable involves managing the company’s financial obligations to its suppliers.

The main tasks of an accounts payable clerk include:

Processing invoices
Verifying the accuracy and completeness of the information
Coding payments
Determining payment terms
Creating payment schedules

Accounts payable clerks may also be responsible for the following:

Preparing reports
Reconciling differences between invoices
Making payments to vendors
Managing vendor relations
Responding to inquiries
Resolving outstanding issues with suppliers

To be successful in an accounts payable role, individuals need relevant accounts payable skills.

They should possess strong organizational skills, attention to detail, and the ability to work in a fast-paced environment.

They should also have a good understanding of accounting principles and experience working with accounting software.

As part of the job responsibilities of accounts payable professionals must monitor supplier invoices to ensure the accuracy and timeliness of payments.

They also provide timely updates on payment status to relevant stakeholders such as internal departments and external suppliers.

Accounts payable professionals may also be responsible for reconciling accounts with vendors or calculating any discounts available on payments made within specified deadlines.

They may also provide analysis of unpaid invoices to help identify potential issues with late payments or discrepancies in vendor charges.

If you are hiring in accounts payable you should consider appropriate accounts payable interview questions to help identify the right candidates.

The Accounts Payable Process

The accounts payable process is commonly considered to start when you receive an invoice.

Ideally, the accounts payable process will incorporate a PO process including tracking of receiving of goods and services covering the full procure-to-pay process.

This is also known as Full cycle accounts payable and ensures faster and more accurate invoice processing with fewer exceptions. If the invoice data matches.

Receive and Review Vendor Invoice
The AP process begins when an invoice is received from a vendor or supplier for goods or services the business purchased on credit terms.
Assign Invoice for Processing
After the invoice is received, it needs to be forwarded to an appropriate person for invoice processing.
This might be a department manager, the company accountant, or an accounts payable specialist.
If a company is clear on its purchase order about who should receive the invoice, this step can be avoided.
AP automation software can automatically receive, process, and assign invoices to the right people.
Enter Invoice Data Into the Accounting Software
AP staff must then enter all the invoice data into the accounting software, including vendor details, items, quantities, cost, etc.
All transactions must be recorded in the general ledger. AP staff must be able to keep track of all business expenses, payments, and reimbursements on all liability accounts.
This step is easier with electronic invoicing and when AP automation software is in use.
Invoice data can be scanned and extracted from the invoice using OCR technology and artificial intelligence and entered directly into the accounting system resulting in faster invoice processing times.
Verify Invoice and Payment Information
Once the information is in the system, accounts payable clerks analyze the payment terms, check for discounts that may be applicable per the contract, and other information that could affect payment accuracy before sending the invoice for approval.
Match Invoice To PO and Receipt
If you are following a 2-way matching process this will involve comparing the invoice to a PO.
If you are following a 3-way matching process you will match against the PO and also the goods received note or other relevant receiving documents.
Approve Invoice
The invoice approval process will likely look different depending on how the invoice has been matched. Successfully 3-way matched invoices may not need any additional approval.
Invoices that were not successfully matched or those with exceptions will likely need additional approval.
Make Payment
The AP department must ensure that all payments are authorized accurately and promptly.
This will ensure invoices can be processed for payment at the optimal time for value and cash flow management.
While some vendors may offer an early payment discount, it may not be feasible for you to leverage it.
The payable department should know when it’s safe to take advantage of those discounts and when it is better to wait until the due date to make payment.
Once the information is verified and payment is approved, the AP department will prepare vendor payments. Vendor payment details may use EFT payments, ACH transfers or wire transfers.
They are typically outlined in the contract but generally include payment by check, bank transfer, wire, credit card, or debit card.

Other Important Accounts Payable Tasks

Reconcile Vendor Accounts

After issuing payment to the vendor, AP staff must periodically reconcile vendor accounts.

This process involves checking to ensure all invoices have been paid correctly and on time.

If there is a discrepancy, it involves reaching out to the vendor to solve the issue – whether it means receiving a refund, more product, or issuing another payment.

It is best to reconcile vendor accounts regularly.

Address Supplier Inquiries Promptly

Occasionally, suppliers may ask questions about when to expect an invoice payment. They may also have questions about orders, delivery, etc.

The accounts payable department must be able to address inquiries, manage invoice disputes, and forward concerns to the relevant department quickly to maintain quality vendor relationships.

Accounts Payable Reporting

Accounts payable reporting is an important part of accrual accounting. Tracking and reporting on AP transactions is key for the day-to-day activities of the department.

The reports generated can vary in different businesses.

This can include accounts payable KPI reports, accounts payable aging reports, accounts payable trial balance, and GRNI reports to help with GRNI Reconciliation.

Challenges in the Accounts Payable Process

There are many challenges in the accounts payable process that need to be managed carefully to ensure optimal performance.

Here is a list of some of the key challenges:

Manual Processes and Data Entry
When your business manually manages bills and invoices, it can take time and resources.
This becomes especially challenging when dealing with large amounts of data or foreign currencies/exchange rates.
Manual processes also leave more room for human error which could result in incorrect payments or missed deadlines.
Improving AP performance against accounts payable Benchmarks can be difficult, for example, if you’re trying to measure and improve your AP turnover ratio.
Lack of Visibility of Committed Spend
Without proper visibility into cash flow, businesses could miss out on opportunities to optimize their costs or save money by taking advantage of discounting options from vendors.
Better forecasting of payments in accounts payable can help improve cash flow management and liquidity management.
Furthermore, without visibility into the accounts payable process, it may be difficult to track down duplicate payments or identify fraud attempts quickly enough to prevent them from occurring.
Without upstream visibility of spend accounts payable forecasting will prove difficult and invoice approval times will be slow.
Inefficient Payment Processes
This could include sending multiple payments for single invoices or waiting too long to pay vendors, resulting in late fees or other penalties.
Inefficient payment processes also make it difficult to manage accounts payable cash flow because there’s no way to know how much money will be available at any given time.
Additionally, inefficient payment processes increase the risk of making duplicate payments. It is hard to keep track of all invoices being processed at any given moment.
Accounts payable automation helps address these challenges by handling invoice reconciliation (with automatic three-way matching to match invoices to receipts and invoices), approval workflows, and more.
Delays with Approving Invoices
Each delay in a step of invoice processing has a knock-on effect with the result of delaying payment processing.
The biggest delay of all is often caused by delays approving invoices. Who needs to approve this invoice?
When you find out they don’t have enough information to approve so they need to check the details and get back to you.
When all the required information is not available it becomes harder to approve invoices. An invoice arrives sometimes a month after the purchase.
Without a system in place will people recall the agreed prices? Not always. That’s where full cycle accounts payable helps.
Managing Documents and Audit Trails
Working with paper causes many problems, not least is that it goes missing. Paper invoices are no different. Lost in a pile, dropped when moving to another office.
Centralizing and digitizing invoice processing automates the management of relevant documents. Invoices are captured and digitized automatically and backed up to the cloud.
Additional documents can be linked similarly so you don’t need to maintain folders and folders of documents.
Recording actions carried out in the accounts payable process can also be labor intensive.
How do your auditors know correct approval processes were followed if you received that on a phone call and there is no audit trail?

Accounts payable is the lifeblood of a business. Without proper management of payables and receivables, a business will falter.

Benefits of Using AP Automation Software

Managing accounts payable can be complex and time-consuming, but it can become easier with the right software.

Accounts Payable software is designed to streamline and automate many tasks required to pay suppliers on time while minimizing human errors that could lead to inaccuracies or delays.

Planergy’s procure-to-pay software, incorporating AP automation software, makes AP automation easy. We connect with your accounting software or ERP to make managing procurement and accounting easier.

AP software allows companies to eliminate mundane tasks and focus their resources on more important projects.

AP automation software provides numerous benefits, including:

Cost Savings
Automation eliminates the need for additional staff and the amount of time staff need to spend processing invoices.
Accounts payable process costs can be greatly reduced resulting in significant savings.
Faster Cycle Time
By automating approval workflows and invoice processing you will greatly reduce the time it takes to process invoices right through to payment.
A lower invoice cycle time is a desirable outcome from improving AP processes.
Tracking the change in accounts payable KPIs, like accounts payable days, accounts payable turnover, and days payable outstanding will show this improvement.
Where there are no exceptions you could even embrace straight-through invoice processing.
Greater Efficiency
Automation reduces invoice processing time and frees up time that would otherwise be spent on tedious tasks, allowing employees to work on more productive pursuits.
Better Accuracy and Reduced Errors
Invoice process automation is far more accurate than manual processes, ensuring accuracy in data entry and other operations.
Plus, it helps ensure you are moving towards a paperless accounts payable workflow, so you don’t have to worry about losing documents and reduces the risks of AP fraud.
Data Security
Cloud software digitizes your records, digitally archives your documents, and ensures your financial data is securely backed up.
It also allows your team to work remotely, giving you the benefits of remote working while reducing the risks of fraud.
Data Collection & Analysis
As automation tracks each step within a process, it creates records that can be used to analyze performance and identify weaknesses or improvements that need to be made.
The reports can help you see things like accounts payable write-offs and accounts payable recovery audits.
Scalable
Manual processes limit how many invoices you can process per employee. When you exceed those levels you need to hire more staff and this can be challenging and time-consuming.
Removing the manual processes and automating ensures your accounts payable team are ready to scale with the company much more easily.
Improves Forecasting
The earlier you know your committed spend the easier it is to forecast for budgets and cash-flow.
Spend visibility helps when preparing accounts payable accruals which in turn helps with month-end closing and when preparing year-end accounts.

Popular Accounting Software Options

Popular accounting software used for managing accounts payable lack the functionality of a dedicated AP solution like Planergy.

But luckily there are integration options for all leading accounting software and ERP.

Popular solutions often used to manage AP include:

Microsoft Dynamics GP

Microsoft Dynamics Great Plains is an installed business accounting or enterprise resource planning (ERP) software offering powerful yet easy-to-use tools that help manage customer relations and finances.

It is still in common use in businesses and continues to be supported but Microsoft have announced there will be no further new features added after version 18.5, released in October 2022.

The updated cloud offering from Microsoft is Microsoft Dynamics 365.
QuickBooks

QuickBooks is a powerful financial management software hosting a wide range of features to help businesses stay on top of their accounts. Available in Online and Desktop versions.

Planergy integrates with QuickBooks Online directly and has an integration with QuickBooks Desktop too.
Xero

Xero is accounting software offering cloud-based access, making it easier for business owners to stay organized and in control of their finances.

Xero has extensive options for integrating with additional software to extend it’s functionality. Planergy integrates with Xero to offer spend management and AP automation functionality.
Sage Intacct

Sage Intacct is an award-winning cloud based accounting and financial management software with features designed to help businesses process payments, reconcile accounts and create accurate reports.

Planergy integrates directly with Sage Intacct as well as other Sage software’s like Sage 200 and Sage 50.
NetSuite

NetSuite is a leading cloud ERP that covers CRM, business accounting, and ecommerce but does not effectively cover AP Automation.

Planergy has integration options for NetSuite customized to your specific NetSuite implementation.

Best Practices for Managing Accounts Payable

When managing accounts payable there are some key things you should do. Here is a list of accounts payable best practices to ensure you are processing invoices accurately and efficiently.

Standardize Invoice Processing
No one is perfect, and there will be occasional mistakes, especially if you still use manual processes and your vendor is the same.
You may be accidentally billed for more office supplies than you received or for a longer period of time than your contract indicates. Duplicate invoices are common. It is often not fraud but just a manual error by the staff at your supplier.
Creating a standard process for how invoices are handled following best practices ensures that information stays consistent across the board. This consistency makes it easier to spot errors during invoice processing, and allows for faster validation.
Enforce Internal Controls
A clear accounts payable policy should be defined with relevant internal controls for accounts payable and invoice processing. Compliance can be enforced more easily with dedicated software.
This should include a set of procedures for invoice approval, incorporating segregation of duties, and a workflow that sends the invoices to the appropriate department, person, or team, such as the CFO, help to streamline the process.
Automation can route invoices to the appropriate team member, and Planergy allows “Out of Office” settings that allow another user to temporarily step in with the same user permissions to keep things running smoothly while someone is on vacation or out on leave.
Negotiate Payment Terms with Suppliers
To maximize your cash flow, your procurement team should negotiate more favorable pricing and payment terms with suppliers whenever possible.
If you can take advantage of an early payment discount, that’s great, but the goal is to keep cash flow positive while having all of your bills paid on time to avoid late fees or penalties.
Use AP Automation
Automated processes can reduce the time, effort, and cost associated with manual data entry by streamlining invoice management.
This increases accuracy and reduces errors. Automation also eliminates manual tasks such as matching invoices to orders and purchase orders, which can save significant time and resources.
Automation also improves the efficiency of accounts payable departments by updating payment terms with suppliers quickly and accurately.
This can result in early payment discounts or other incentives that benefit the company’s bottom line.
By reducing the risk of human error, automated accounting processes help ensure compliance with applicable laws and regulations. It can also help ensure you can track and improve on established KPIs.
Digitally Archive Documents
Creating digital copies of your invoices and credit notes is important for accurate accounting. By automatically creating digital copies, you can effortlessly store them in a central repository for easy access.
This reduces the chances of misplacing important documents, so you always have an up-to-date record of your transactions.
Keeping supplier contracts in a central repository also keeps them readily available for review if any issues arise during the relationship.
Having all contracts stored in one place makes it easier to stay on top of legal requirements and ensure compliance.
Monitor and Audit AP Regularly
Keeping an eye on things ensures both you and your vendors comply with all the clauses in the contract. It also helps ensure you comply with reporting requirements, tax regulations, and other relevant industry standards.
Implementing an accounts payable audit program to regularly review your internal processes will ensure compliance and performance does not slip.
Accounts payable audit procedures are often overlooked but are important to maintain any improvements are built on.
Use Risk Management Techniques
To further reduce the issues between you and your vendors, conduct a risk assessment and integrate risk management techniques, like proactive risk management.
This can be done by establishing a threshold of acceptable levels of risk per contract and proactively monitoring those contracts on an ongoing basis.
This can help identify issues early on, with the ability to take action before any major compliance problems arise.
Additionally, integrating digital and automated processes for supplier management will help streamline the process and increase visibility.

Future Trends in Accounts Payable

The future of accounts payable is focused on automation and digitalization.

Accounting departments are increasingly adopting automated processes to streamline operations, reduce costs, improve accuracy, and ensure compliance with regulatory requirements.

Integrating cloud-based platforms with accounts payable systems enables companies to manage their payments securely and efficiently.

Linking together procurement and accounts payable more effectively with procure-to-pay software that incorporates advanced AP automation will enable better collaboration between finance and procurement.

In the future, artificial intelligence (AI) and machine learning will be used to automate the accounts payable process further and improve accuracy.

New technologies such as blockchain will also provide secure ways for companies to make payments quickly and easily.

This is why now is the perfect time to implement AP automation and digitize accounts payable in your business.

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What’s your goal today?

1. Use PLANERGY to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our Accounts Payable Automation Software page to see how PLANERGY can automate your AP process reducing you the hours of manual processing, stoping erroneous payments, and driving value across your organization.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Preparing Your AP Department For The Future”

Download a free copy of our guide to future proofing your accounts payable department. You’ll also be subscribed to our and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Accounts Payable: What Is It, Definition, Job Description, Process, and Software appeared first on Planergy Software.

Xero Features You Need To Know About

Rob Biedron — Mon, 27 Mar 2023 08:57:18 +0000

Clients and results

More Customers

Download a free copy of "Preparing Your AP Department For The Future", to learn:

How to transition from paper and excel to eInvoicing.
How AP can improve relationships with your key suppliers.
How to capture early payment discounts and avoid late payment penalties.
How better management in AP can give you better flexibility for cash flow management.

Download Free Copy

Xero Features You Need To Know About

Written by Rob Biedron
15 min read

Accounting Technology & Software Xero

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What Is Xero?

Xero, based in New Zealand, is a powerful cloud-based accounting software that has become increasingly popular recently.

Unlike many traditional accounting tools, it does not require you to manually enter your financial data, as it is connected directly to your business’s bank account and credit cards.

All bank transactions are automatically added to the system, reducing the time required to stay on top of your finances.

Xero also provides extensive reporting features, allowing you to keep track of income, expenses, and other key data.

It has a user-friendly interface and is known in the accounting software industry for its ease of use. It’s great for budgeting, expense tracking, and time tracking, and it comes with unlimited users.

Xero Pricing

Xero has three pricing plans to choose from, and you can move through the plans as your business scales. Every plan includes:

Bank connections
Inventory management functionality
Reporting
The ability to accept payments
Purchase orders
Files
Manage Xero contacts
Sales tax

Early

Priced at $12/month, this plan is great for new businesses, freelancers and other sole proprietors. You can send quotes and up to 20 invoices per month.

You’ll also be able to enter and pay five bills a month, reconcile your bank transactions, capture bills and receipts, and get an idea of your short-term cash flow.

Price is changing to $13/month as of November 14, 2022, at 4 PST and will bill at the new rate from that point forward.
Growing

Priced at $34/month, this plan is ideal for growing businesses. There’s no limit on the number of invoices and quotes you can send, or the bills you can enter.

As with the Early plan, you’ll be able to reconcile bank transactions, capture bills and receipts, and see reports for your cash flow.

Price is changing to $37/month as of November 14, 2022, at 4 PST and will bill at the new rate from that point forward.
Established

Priced at $65/month, this option is best for established businesses. In addition to the features of the Growing plan, businesses can also:
- Use multiple currencies
- Track projects
- Handle employee expense claims (capture costs, submit, approve, and reimburse spending)
- See more in-depth analytics
Price is changing to $70/month as of November 14, 2022, at 4 PST and will bill at the new rate from that point forward.

Each plan can add the Gusto Add-on, starting at $40/month, so businesses can easily take care of their payroll needs.

Xero Features

Here are the top 11 Xero features you need to know about.

Automatic Bank Feeds
Gone are the days of manually entering transactions into your accounting software.
With Xero’s automatic bank feeds, all your transactions are pulled directly from your bank or credit card statements and entered into your account—saving you hours of data entry every month on bank statement reconciliation.
Invoicing and Billing
Xero makes it easy to create and send invoices and bills to get paid faster.
With customizable templates and online payments, your customers can pay you in just a few clicks—without ever having to leave their desks.
Plus, automated payment reminders take the hassle out of chasing late payments.
- Quick Quotes
  Once you’ve quoted someone for the cost of a job, you can easily convert it into an invoice in a click or two to save time.
  Once the quote has been sent to the customer, the status gets updated in Xero as either accepted or rejected. You’ll also be able to see client comments so you know how to follow up.
- Invoice Templates
  Every account starts with the default invoice template, but you can change it as needed.
  Navigate to Settings > General Settings > Invoice Settings. You’ll see the invoice template feature “Branding Themes.”
  You can add a logo to your invoice with the Standard Branding Themes. Click Options > Upload logo. You can also use Options > Edit to change some of the text.
  If your business requires more invoice customization, you’ll use a Custom Branding Theme. A Custom Branding Theme uses template files when printing invoices, quotes, purchase orders, and credit notes.
  You can add backgrounds, tables, lines, images, and text to create a cohesive, professional look across all your documents.
- Faster Invoices with Saved Items
  If you’re often entering the same line items (same prices, item descriptions, etc.), you can save time with “Items.”
  In the Item column, look for the dropdown box. You can use it to create a new item or select an item you’ve used before. It’s also possible to search for items with the search box.
  It’s also possible to show or hide the item code and name on invoices (printed or emailed) with Invoice Branding Themes.
  That way, if you raise your prices, you can adjust them from Accounts > Inventory and have them updated on any future invoices you create without affecting approved invoices.
Reporting and Analytics
Xero’s reporting and analytics tools give you real-time insights into your business so you can make informed decisions about where to invest your time and money.
With over 80 built-in reports, you can track everything from revenue and expenses to inventory levels and employee performance.
You can even create custom reports to suit your business needs. And with the Xero Dashboard, you’ll get a quick overview of everything happening in the business so you can focus efforts where you need to.
Mobile App
Xero’s mobile app allows you to stay on top of your finances even when you’re on the go. With the app, you can send invoices, reconcile transactions, approve bills, and more from your smartphone or tablet.
So whether you’re at the office or out on the job site, you can rest assured that your finances are always under control.
The Xero mobile app is available for Android and iOS devices.
Account Watchlist
With this feature, you can choose the accounts you want to keep a closer eye on. You’ll see the balance for the month and the financial year to date. This is helpful for things such as:
- Monitoring your tax debts
- Watching sales grow over time
- Watching expense accounts to prevent overspending
You can use it with the Profit First Framework to ensure you’re putting in enough money to pay your taxes.
To add or remove accounts from your Account Watchlist:
1. Navigate to Settings > General Settings > Chart of Accounts
2. Click the name of the account you wish to add or remove from the watchlist.
3. Click the checkbox next to the “Show on Watchlist Dashboard” and then click Save.
Xero is a highly versatile software that can be adapted to suit the needs of any industry.
HubDoc
Xero HubDoc is a software platform that makes managing and organizing financial documents easier.
With simple tools for scanning and uploading documents and powerful search features to help you find exactly what you need, Xero HubDoc ensures that your financial data remains organized and easily accessible at all times.
Whether you’re a small business owner or a team of accountants, Xero HubDoc provides the tools you need to improve your workflow and stay on top of your financial data.
You’ll never have to worry about losing track of a receipt again.
Xero added the HubDoc feature to all plans for free in March 2020.
File Attachments
How many times have you sent an email that says, “I’ve attached,” only to send it without actually adding the attachment?
Since sending file attachments with quotes is common, you can easily attach files to your quotes from nearly any Xero quoting screen.
You can attach a PDF to a quote, an invoice, or even a journal entry, so information is there whenever and wherever you need it.
Integrations
Xero integrates with a wide range of third-party apps to help streamline your workflow and save you time. From payroll and CRM to eCommerce and point of sale, there’s an integration for almost every business need.
It integrates with popular payment gateways like Stripe and Square. Xero integrates with Planergy also. So if you need AP automation software or procure-to-pay software that is compatible with Xero, you know where to come.
So whether you’re looking for a way to automate repetitive tasks or want to work more efficiently, Xero has you covered.
Securely Share Data with Financial Managers
Whether you work with an internal bookkeeper or an outsourced financial manager, you can allow the system to share all the relevant data with them.
The data is secure, and updates in real-time, so they can easily do their jobs.
Credit Limits
Credit limits are common in purchasing and allow you to extend customers a certain amount of credit based on their financial stability and history with your company.
This feature is easy to overlook but can be found in the financial details screen for any customer.
Xero Email Templates
You can email a lot of things directly from Xero, including quotes, invoices, purchase orders, statements, credit notes, receipts and remittances. The defaults work quote well, but you can also customize them.
And instead of having to change each email, you can create and use your own email templates. It’s a great way to send invoice reminders, so you’re always paid on time.

If you’re not using Xero for your accounting needs, you’re missing out on some serious time-saving features—like automatic bank feeds, online invoicing and billing, reporting and analytics tools, mobile app access, and integrations with popular business apps.

Switching to Xero is easy—and once you see how much time it saves you each month, you’ll quickly see why so many people consider it the best accounting software available.

Download PDF

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our Integrations page to see how Planergy integrates with Xero to make bookkeeping and accounting easier.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Preparing Your AP Department For The Future”

Download a free copy of our guide to future proofing your accounts payable department. You’ll also be subscribed to our and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Xero Features You Need To Know About appeared first on Planergy Software.

Tail Spend Analysis: What Is It, How To Perform It, and the Benefits

Lyle Del Vecchio — Thu, 02 Mar 2023 10:43:29 +0000

Clients and results

More Customers

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

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Tail Spend Analysis: What Is It, How To Perform It, and the Benefits

Written by Lyle Del Vecchio
17 min read

Big Data Business Intelligence (BI)Spend Analysis

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Introduction To Tail Spend Analysis
Defining Tail Spend
Benefits of Tail Spend Analysis
Tail Spend Analysis Best Practices
Establishing Tail Spend Analysis Metrics
Developing a Tail Spend Analysis Plan
Analyzing Data and Identifying Trends
Leveraging Tail Spend Analysis To Improve Efficiency
How To Automate Tail Spend Analysis

Tail spend analysis is an important tool for businesses looking to optimize spending and ensure their supply chain runs efficiently.

Tail spend analysis helps companies identify areas of spend that are falling through the cracks, allowing them to make more informed decisions and achieve greater savings.

In this blog post, we’ll cover what tail spend analysis is, its benefits, how to develop a plan for it, how to analyze data and trends, and how to best leverage tail spend analysis to improve efficiency.

Introduction To Tail Spend Analysis

Tail spend analysis examines a company’s spending patterns and identifies opportunities to reduce costs and improve efficiency.

It’s an important part of any organization’s financial management, as it helps identify wasteful spending and uncover potential savings.

Tail spend analysis helps companies identify areas of spend that are falling through the cracks and gain visibility into their overall spending.

By understanding where their money is going, companies can make more informed decisions, reduce waste, and save money.

The process of tail spend analysis involves analyzing data from various sources, including supplier invoices, purchase orders, contracts, and other financial documents.

Having the right information and insights is important to make the most of tail spend analysis.

Defining Tail Spend

Tail spend is a term used to describe the small, often overlooked purchases made by an organization. It’s typically low-value, high-volume purchases made in areas such as office supplies, shipping, and travel.

While these purchases may seem insignificant when taken individually, they can make up a sizable portion of a company’s total spend.

Tail spend follows the Pareto principle – the idea that 80% of a company’s spending can be connected to 20% of the supplier base. The long-tail is where the majority of purchases occur.

Tail spend should not be confused with maverick spending, which is non-strategic spending that occurs outside of an established internal process.

It’s also not the same as spot buying, which is the unplanned, one-time emergency purchase of a small, inexpensive, infrequently used item.

Tail spend is often unmanaged spend because it’s spread out across multiple departments and suppliers. This can make it difficult to track and manage.

However, this doesn’t mean it needs to be ignored. Tail spend can be an important source of savings and efficiency gains.

Benefits of Tail Spend Analysis

Tail spend analysis offers several benefits for businesses. By understanding their spending patterns, companies can gain visibility into their overall spending and ensure they get the best value for their money.

Tail spend analysis also helps procurement professionals identify areas of wasteful spending and uncover potential savings.

This can lead to cost reductions and increased efficiency, helping businesses reduce their operational costs and increase their profits, which is good for the bottom line.

Tail spend analysis can also help companies identify opportunities for consolidation and standardization. This can lead to improved relationships with suppliers and greater savings.

Finally, tail spend analysis can help companies better understand their purchasing patterns and identify areas where they can make more informed decisions, leading to better supplier relationships and more efficient purchasing processes.

Tail Spend Analysis Best Practices

There are several best practices to keep in mind when conducting tail spend analysis. Companies should:

Set clear goals and objectives for the initiative
Define the scope of the analysis
Analyze data from multiple sources
Identify trends and opportunities for savings
Establish metrics to track progress
Leverage insights to improve efficiency in the procurement process.

By following these best practices, companies can ensure they get the most out of their tail spend analysis.

When left unmanaged, tail spend can cost an organization millions of dollars. Managing tail spend is a worthy investment of time and resources.

Establishing Tail Spend Analysis Metrics

Companies should establish metrics to measure their progress to ensure they get the most out of their tail spend analysis. This will help them track their efficiency and identify areas of improvement.

Common metrics for tail spend management include:

Cost savings
Number of suppliers used
Number of contracts renegotiated (contract management)
Number of items consolidated
Number of items standardized

By tracking these metrics, procurement functions can get a clear picture of their progress and identify areas for improvement.

Developing a Tail Spend Analysis Plan

To make the most of tail spend analysis, it’s important to develop a plan. Companies should identify the goals and objectives of their analysis, the data sources they will use, and the metrics they will measure.

It’s also important to define the scope of the analysis. Companies should decide which categories of spend they want to focus on, such as office supplies, travel, or shipping.

This will help them narrow down the data and focus their efforts.

Once a plan is in place, companies should develop a timeline to ensure they stay on track and meet their goals, to help them stay organized and continue making progress.

Analyzing Data and Identifying Trends

Spend analysis is the art of extracting useful information from your spending data. It can help your company make better business decisions and avoid unnecessary waste.

However, it is also very time-consuming. A proper plan should be implemented to make the process as efficient as possible.

Spend analytics involves classifying your spending data, identifying relevant trends, and implementing solutions that improve your purchasing power.

This can help you to understand your expenditures and budgets and identify cost reduction opportunities.

Spend analytics can be performed by hand or with the help of software. Using data visualization tools, you can explore spend data and discover hidden insights.

Tools often have an intuitive interface that allows non-technical users to build customized dashboards and explore data in real time.

Getting your spend data in order is a key first step in any spend analysis project. Clean spend data will enable you to analyze and improve your spending quickly.

Once a plan is in place, companies should begin analyzing their data. This involves looking at spending patterns and identifying areas of potential savings.

Companies should look for trends in spending, such as overspending on certain items or underutilizing certain suppliers.

Companies should also look for opportunities for consolidation and standardization. This can help them streamline their processes and reduce costs.

It’s important to remember that tail spend analysis is an ongoing process. Companies should regularly review their data and update their plan as needed.

Identify Your Supplier Base

When conducting a tail spend analysis, it’s important to understand your supplier base. Tail spend is often overlooked as a source of significant savings.

But when properly managed, it can save an organization up to 15 percent of its total procurement spending.

It can also help improve the employee experience. If your employees aren’t happy with the quality of products they receive from your suppliers, they’re likely to be less productive.

You’ll also be able to eliminate obstacles like delivery delays.

As many B2B businesses have learned, it pays to consolidate your supply base. Many suppliers are now working as aggregators. This means they’re expanding their business offerings to fulfill customer demands.

The best way to identify your supplier base is to conduct a comprehensive spending analysis. To do this, you’ll need to gather information on all spend data sources. Spend analysis includes grouping spending into standardized categories and cleaning data for errors.

After gathering all your data, you can categorize your expenditures and identify specific small purchases.

Categorizing your spending data by department or type of spend (direct vs. indirect spend) will help you achieve sustainable cost reduction with more strategic purchasing.
Segmenting “Major” Spend from “Tail Spend”

For most procurement teams, this can be a daunting task. However, it’s also an opportunity to create a competitive advantage. Companies often make a multitude of purchases, some of which may not be worth the time or cost.

While not a magic pill, many steps can be taken to improve the process and reduce costs.

Some key points to remember include the importance of data collection and establishing a process to follow. This can include a combination of technology and training.

A good way to start is by examining the various spend categories within your organization. This will give you an idea of where to focus your efforts.

Spend in areas such as direct purchasing and indirect purchasing can be especially beneficial.
Reducing the Number of Suppliers in the Tail-End

Companies can reduce the number of suppliers in the tail-end of their supply chain through digital tools and a well-established procurement framework.

This can help them save time and money while maintaining quality and compliance with business policies.

For instance, one manufacturing company found hundreds of duplicates in its supplier list. The team used an algorithm to identify these duplicates and eliminated them from their RFQ.

They found that their costs could be reduced by about 30%. Another example involves a global chemicals company. By bundling materials with strategic suppliers, they can get better prices, less lead times, and reduced quality issues, making stakeholders happy.

However, switching suppliers can be difficult. Suppliers often need approval from production, R&D, or quality control. When a new supplier is brought in, they must understand the product or service’s value to the company.

Leveraging Tail Spend Analysis To Improve Efficiency

Once companies have identified areas of potential savings through tail spend analysis, they can leverage these insights to improve their efficiency.

This can involve renegotiating contracts with suppliers, consolidating suppliers, standardizing processes, and streamlining operations.

For example, a company may renegotiate contracts with suppliers to get better pricing. Or, they may consolidate suppliers to reduce the number of vendors they manage.

By taking these steps, companies can reduce their costs and improve their efficiency. This can lead to increased profits and a more streamlined supply chain.

How To Automate Tail Spend Analysis

Tail spend analysis can be a time-consuming and labor-intensive process. To make it easier, companies can leverage technology to automate the process of spend analysis.

Automation tools can help companies quickly and easily analyze their data and identify areas of potential savings. They can also help automate supplier contract negotiation and data analysis processes.

Planergy’s procurement system helps you with tail spend analysis with our comprehensive spend management tools and spend analysis software. Our tools make it easy to track spending, analyze data, and identify opportunities for savings.

Our tool can be used to support strategic sourcing efforts and help the procurement department maximize budgets while reducing low-value transactions and one-off purchases.

Tail spend analysis is an important tool for businesses looking to optimize their spending and ensure their supply chain is running efficiently.

It can help companies identify areas of wasteful spending and uncover potential cost savings.

By developing a plan for tail spend analysis, analyzing data, and leveraging insights to improve efficiency, companies can reduce their costs and increase their profits.

Automation tools can also make the process easier and more efficient.

Download PDF

What’s your goal today?

1. Use PLANERGY to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our Spend Analysis Software page to see how PLANERGY can empower you to get more value from your spend.
Learn about us, and our long history of helping companies just like yours.

2. Download our “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Tail Spend Analysis: What Is It, How To Perform It, and the Benefits appeared first on Planergy Software.

Electronic Payments: What Are They, Types, and Benefits

Keith Murphy — Thu, 23 Feb 2023 08:48:30 +0000

Clients and results

More Customers

Download a free copy of "Preparing Your AP Department For The Future", to learn:

How to transition from paper and excel to eInvoicing.
How AP can improve relationships with your key suppliers.
How to capture early payment discounts and avoid late payment penalties.
How better management in AP can give you better flexibility for cash flow management.

Download Free Copy

Electronic Payments: What Are They, Types, and Benefits

Written by Keith Murphy
17 min read

Accounts Payable Invoice Processing Payments

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What Are Electronic Payments?

Electronic payments are payment methods that involve the transfer of funds electronically rather than using physical money.

Even paper checks are processed electronically now, so the money is immediately withdrawn from the account.

Types of Electronic Payments

Common types of electronic payments include credit and debit cards, mobile payment apps such as Apple Pay and Google Pay, online banking transfers, cryptocurrency (Bitcoin, Litecoin etc.), digital wallets (PayPal), direct debits, and gift cards.

These forms of payment offer greater convenience for both customers and businesses.

While some payment options require the user to have a formal bank account with a financial institution, others do not.

Credit and Debit Card Payments

Credit and debit card payments allow customers to purchase goods or services online using their bank-issued credit or debit cards.

Credit cards issued by banks and financial institutions are a type of revolving loan that allows customers to borrow money up to a predetermined limit.

Debit cards, on the other hand, draw from a customer’s existing funds and can be linked to either checking or savings accounts.

Both types of cards provide speed and convenience for customers, as well as added security features such as fraud protection.

Two of the most popular names in global payment solutions are Mastercard and Visa.

Your credit or debit cards may have either of these logos – signifying you can use them with whatever merchants accept them.
Bank Transfer Payments

Bank transfers are a safe way to transfer money, especially when compared to a cash transaction. They are also faster, and can be used to make purchases.

There are several ways to accomplish this, from phone banking to online payments.

Also, be sure to double-check your recipient’s name and account number. If you have the wrong account, it can be tricky to retrieve the funds.

One of the cheapest and fastest ways to make an electronic payment is by using a wire transfer. A wire transfer is an electronic funds transfer (EFT) that can be sent to anyone in the world.

It works by withdrawing the funds from a sender’s bank account, and then sending them to a destination.

There are two types of automated clearing house (ACH) transfers: regular, which take a few business days, and same-day. While regular ACH transfers are free, same-day transfers can be made for a small fee.

The ACH network handled 29.11 billion payments in 2021, and the volume continues to grow. Many larger banks can process a single ACH payment in a matter of hours.
Virtual Card Payments

Virtual card payments are a type of electronic payment where customers can purchase goods or services online with a virtual card instead of a physical card.

A virtual card is a payment instrument that has the same attributes as a traditional credit or debit card but exists solely in an electronic format.

Virtual cards can be generated and used instantly, making them an ideal online purchase solution. Additionally, they offer increased safety and security compared to using physical cards.
Digital Wallets

Digital wallets offer an easy and convenient way for consumers to pay for goods and services online. These digital payments solutions eliminate the need for physical credit or debit cards.

In addition to eliminating the need for plastic, the convenience and security of electronic payments also allow users to transfer funds internationally.

Digital wallets are available for both individuals and businesses. They are a downloadable mobile app that enables customers to pay via phone.

A digital wallet is an encrypted software application that allows consumers to store their personal and financial information. The information stored includes name, shipping address, credit card details, e-coupons, and tickets.

Users can add a virtual card to their wallet and authorize it to make payments using their bank account. This helps reduce the risk of fraudulent transactions.

Some credit card issuers offer enhanced rewards when customers use their digital wallets.
Cryptocurrency

The cryptography of the blockchain system is the backbone of cryptocurrencies. It chains together a decentralized network of computers to create a distributed database.

This allows for peer-to-peer transactions. Using cryptography also makes it almost impossible to counterfeit.

Many countries have started to regulate cryptocurrencies. In the US, taxpayers are required to report the sale of cyrptocurrencies to the IRS on their annual tax returns.

Although some countries have not adopted cryptocurrencies as a means of payment, interest in cryptocurrencies has grown in recent years.

As a result, the cryptocurrency industry has increased in size. The cryptocurrency market is expected to reach $2.2 billion by 2026, with a compound annual growth rate of 7.1%.

There are currently thousands of different cryptocurrencies. Many are used for online payments. Cryptocurrency advocates argue that a decentralized system will be more secure and efficient.
Cross-Border/FX Payments

Cross-Border/FX Payments are payments that involve international currency transfers.

These payments allow customers to send and receive funds in different currencies and ensure that the correct amount is delivered to the recipient.

Cross-Border/FX Payments often have lower transaction fees than other forms of payments, making them an attractive option for customers looking to save money.

Benefits of Electronic Payments

Improved Security

Electronic payments improve security by providing an added layer of protection from fraud and identity theft.

Compared to traditional forms of payment like cash or checks, electronic payments use encryption technology and secure servers that protect sensitive financial information from hackers.

Additionally, electronic payments are less susceptible to counterfeiting than physical forms of payment, making them a safer option for businesses that want to protect their customers’ data and money.
Streamlined Processes, Reduced Costs, and Faster Transactions

By transitioning to an electronic payment system, businesses can drastically reduce paper, ink, and postage costs while significantly reducing the time required for manual check printing and mailing.

Adopting an e-payments strategy can potentially save your accounts payable department as much as 80% on payment processing fees.
Greater Flexibility for Consumers’ Payment Preferences

With the variety of electronic payment options available, consumers can choose the payment types that work best for them.

From one-time payments with an electronic check, to recurring direct deposits from employers, electronic payments put customers in control of how to make payments at the point of sale, whether they want to allow a one-time payment or consent to and enroll in recurring billing.
Easier Access To Global Markets

Electronic payments make it easier for businesses to access international markets. Not only can payments be made quickly and securely, but small business owners can also benefit from reduced transaction costs, improved security and authentication protocols, and better compliance with local laws.

Furthermore, the ability to accept payments in multiple currencies opens up new opportunities to reach customers worldwide without additional overhead expenses.
Increased Visibility and Control Over Payment Data

Electronic payment systems offer invaluable insights into payment statuses, financial metrics, and comprehensive audit trails.

These systems also minimize the costs associated with data entry errors and the likelihood of them occurring.

Though electronic payment methods have numerous benefits, each method has its own pros and cons.

Advantages and Disadvantages of Various Electronic Payment Methods

ACH Debit Pull

ACH debit pulls are a popular payment method for payroll and online payments. With this system, the payee initiates the “pull” of funds from the payer’s account using an electronic batch payment system.

The benefits of ACH debit pulls include cost-efficiency, as it is usually free or at a low cost, and quick processing time.

The downfall is the increased risk, since it requires vendors to have access to your bank account information.
ACH Credit Push

ACH credit push is an electronic payment method often used for known vendor payments.

Differentiating itself from ACH debit pull, the payer initiates the payment by “pushing” funds out of their account using an electronic batch system.

Its benefits include low processing costs relative to credit cards, plus the option to choose between a one-time or recurring payments.

However, banks charge a fee for ACH credit pushes, which makes them expensive to process; plus, because it involves real account information, it is higher risk and most often reserved for large corporations with a high payment volume.

Moreover, ACH debit pulls and ACH credit pushes require additional administrative time for reconciling invoices due to the manual transfer of transaction data.
Credit Card

Credit cards are a popular payment option for retail purchases, allowing cardholders to borrow money from the issuing bank up to a predetermined limit.

The advantage of this payment method is that it involves merchant-initiated transactions paid directly from the cardholder’s credit line, making them quick and convenient.

Some vendors may not accept credit cards because of higher processing fees. And because they involve just one string of numbers on a plastic card, they are more susceptible to fraud.
Debit Card

Debit cards are commonly used for retail purchases, with the payment being “pulled” from the cardholder’s bank account as opposed to charged to the cardholder’s credit line, like in credit card payments.

The advantages of using debit cards include the vendor having the certainty of payment, along with the time and effort savings that come along with it.

However, compared to credit card payments, debit card processing fees aren’t much cheaper for the vendor.
Wire Transfer

Wire transfers are real-time payments made for both domestic and international purchases, wherein the cash is instantly moved from one account to another.

These transfers can be initiated in a matter of minutes and processed quickly, usually within the same day in the U.S., making them a more dependable option than paper checks.

That said, wire transfers come with a hefty price tag and pose a major security risk to payers due to the immediacy of funds availability – making them an attractive target for those looking to hijack bank information.
Commercial Card

Businesses issue commercial cards to employees to allow direct payment from a corporate line of credit for business purchases, typically T&E expenses and vendor payments.

These cards are cost-efficient, quick, and offer good security. However, they can be tricky to follow up on and reconcile with invoices.
Purchasing Cards (P-Card)

P-cards are similar to company cards, in that they allow purchases without requiring invoices.

These cards usually come with tighter restrictions and spending caps than commercial cards. However, they are still low-cost, secure, and quick.

One downside is that it can be challenging to audit individual P-card transactions for potential fraudulent activity or risk.
Virtual Cards

Virtual cards are a payment method free of physical plastic, as businesses can generate a single-use 16-digit number authorized for a specific payment amount. This is how financing company Affirm, works with many online merchants.

Advantages include no cost to the payer, fast transactions, and heightened security from tokenization – which keeps bank information from being compromised. Also, businesses can benefit from rebates when using virtual cards.

Unfortunately, fewer vendors accept virtual cards compared to other electronic payment methods. We expect this to change in the future as more vendors understand the benefit virtual cards offer.

Automate Your Electronic Payments with PLANERGY

Using our automated system, you can automate invoice payments according to vendor terms, making sure payments are made on or before their due date.

You have more control over cash flow, and don’t have to worry about missing payments.

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1. Use PLANERGY to manage purchasing and accounts payable

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Travel and Expense Policy: What Is It, Example Template, and Best Practices

Rob Biedron — Thu, 09 Feb 2023 11:24:33 +0000

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Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
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Travel and Expense Policy: What Is It, Example Template, and Best Practices

Written by Rob Biedron
20 min read

Expense Management Expense Reporting Process & Procedures

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What Is a Travel and Expense Policy?

To travel for work-related purposes, employees often need to submit a travel expense report detailing their costs.

This can include travel costs like airfare, hotel, and other miscellaneous expenses like meals and incidentals.

Many companies have a travel and expense policy outlining the rules and procedures for submitting these reports.

In this blog post, we will discuss what a travel and expense policy is, provide an example template, and outline some best practices.

Why You Need a Travel and Expense Policy

Establishing a travel and expense policy for your business is a wise choice. A clear policy defines allowable expenses for any business trip, which reduces the chance of unnecessary or inappropriate charges.

It’s efficient and cost-effective to have a predetermined budget for each employee that adheres to the company’s financial regulations – this ensures employee reimbursements are issued following company standards.

Having all of these processes itemized allows you to track spending more accurately, so there won’t be unwelcome surprises during the budget season either.

With a travel and expense policy in place, your organization can manage employee journeys and reimbursements competently.

With rules in place, it’s easier to predict how much each traveler will spend on business travel expenses, making overall expense management easier.

Other benefits include:

Tax write-offs for the company and IRS regulations compliance.
Fraud prevention.
Streamlines reimbursement.

Considerations for a Policy that Works for Your Business

Using a blanket T&E policy may be tempting, but the fact is, no two companies operate the same way. They should have customized policies that fit the company’s needs while supporting employees.

At its core, the policy should address how employees are expected to pay and be reimbursed for trips taken on behalf of their company.

The policy must also feature detailed guidelines surrounding who is authorized to book travel arrangements and any limits and restrictions.

Companies may also want to consider implementing a pre-trip authorization process, and requiring all expenses related to the trip to be documented in order due documentation for reimbursement purposes.

Keeping your travel and expense policy up-to-date with current laws, regulations, and industry standards is important for maintaining compliance with current laws, so companies should stay aware of changes that may affect their policies.

Put Finance and HR to Work Together

To start crafting a T&E policy for your organization, arrange a meeting with both finance and human resources. Collaboration and cooperation between these two teams are crucial.

The finance department provides information about current expenses and supports creating the guidelines employees need to follow. HR then communicates the policy to employees and enforces compliance.

Consider Multiple Factors Unique to Your Organization

Some companies may choose to reimburse incidental expenses. Some companies provide a per diem allowance, while others only reimburse actual expenses.

Start by looking at your organization’s current travel spend. As you analyze the data, consider the following:

How often do employees travel?
How much does the average business trip cost?
What percentage of employees travel?
What is the return on investment of these trips?
Measuring ROI on business trips can be difficult, depending on the nature of the trips and the reason for them.

With the answers to those questions in hand, consider:

Methods of Travel: Which methods of travel are acceptable? Will employees be able to travel in business class or first class, or is air travel limited to coach only? Will you cover any extra luggage fees? What about ground transportation? What’s the maximum spending limit? Are there special rules that apply to international travel?
Lodging Expenses: What is the limit for a hotel room? Are employees required to stay at a certain hotel or within a certain chain?
Personal Vehicle Expenses: How will employees report mileage? What’s the maximum you’ll reimburse for parking expenses?
Meal Expenses: What is the per diem for meals? Are all three daily meals covered? Are they allowed to take clients to dinner? Will you reimburse room service? Are entertainment and related expenses included while on the trip?
Miscellaneous Expenses: Think of this as the unexpected. What if an employee’s luggage is lost and they need to purchase new clothes? What if they get bumped from their flight, and there’s an additional fee to rebook? What if the car rental company doesn’t have the economy car that was booked?
Company Credit Cards: Who is allowed to use the cards, and what can they use them for?
Expense Reporting Process: How are employees to track their out-of-pocket expenses? Who do the employee expense reports go to? How do they submit them? Are original receipts required, or will scanned/photographed versions suffice?

How to Create an Effective Policy for Your Organization

Outline everything you deem acceptable in the above categories. If certain things aren’t covered, make sure those are clearly defined. For example, meals are covered, but alcoholic beverages are not.

Define what is considered an acceptable business purpose. Will you cover trips for continuing education?
Define who is authorized to book travel arrangements. What booking tools can be used?
Define how to turn receipts and expense reports.
Define the acceptable timeframe for reimbursement requests (such as within 15 days after the trip is complete) and when employees can expect to receive the reimbursement.
Include any other guidelines for reimbursable expenses, including rules for upgrades, tolls, mileage rate, per diem rates for each department, gratuities, etc.

Once these details are outlined, it’s time to put them together into a formal travel policy.

Your business needs a travel management policy, but it can be hectic to put one together. Our template will help.

Travel Expense Policy Template

Your policy should be broken down into six sections:

Introduction
Travel Booking Process
Business Expense Categories
Non-Reimbursable Purchases
Expense Reporting and Reimbursement Process
Travel Support, Safety, and Duty of Care

Introduction

Use this section to let your staff know your policy isn’t just more red tape – it’s designed to keep them safe, keep things fair, reduce confusion, and ultimately, save time.

Depending on your organization, you may have multiple policies – different policies depending on the department or type of employee. If that’s the case, your introduction should also include who the policy is for.
Travel Booking Process

Use this section to include everything your team needs to know about where and how to book travel – whether someone will make the arrangements for them or they will make the arrangements themselves.

Here’s where you outline:
- How to Book Travel
  
  Include your process, method, and platform for booking any company travel. It’s ideal to use a platform to allow employees to book options within policy. If you do, include the name of the platform.
  
  If employees cannot book their own travel, include the name and contact information of the travel agency or company employee who will take care of booking the travel arrangements.
- Approval Process
  
  Include the details of the approval process, especially for senior management. The approval process for the C-Suite and senior employees may vary from others.
- Leisure Extensions
  
  If you want business travelers to be able to extend their trip to the weekend or use vacation days for additional time, include rules around these extensions.
  
  Include details about the allowable difference for return flights and what separates personal expenses from business ones.
  
  Make it known that they will incur additional costs that your company will not reimburse.
- Loyalty Program Usage
  
  Many companies don’t let employees accrue personal loyalty points on business travels.
  
  But, if you trust your team to do the right thing, include a line that says something along the lines of, “Employees must not choose more expensive travel options for the sole purpose of gaining additional loyalty points.”
- Traveling with Non-Employees
  
  Expenses related to traveling with spouses or other family members, pets, or friends outside of the company aren’t generally eligible for reimbursement.
  
  If any situations are subject to approval, such as attending a networking event, outline these possibilities.
Business Expense Categories

This is a crucial part of your template as it outlines what employees can expense. This is key to keeping things as cost-effective as possible.

Air Travel
- Preferred vendors
- Approved tools or methods of booking
- Rules regarding allowed travel class
- How many days in advance must flights be booked for both domestic and international travel.
Accommodations
- Preferred vendors and negotiated rates, if any
- Approved tools or methods of booking
- Maximum nightly rate
- Rules regarding standard rooms and upgrades – for instance, upgraded rooms are only allowed when standard is completely booked
- Reimbursable costs – parking, etc.
- Rules for booking house-sharing or apartment rentals
Rental and Personal Vehicles
- Allowed types of rental car class
- Number of employees expected to share a vehicle when traveling together
- Mileage reimbursement rate, per mile or kilometer
Rail Travel
- Approved tools or methods of booking
- Type of ticket allowed
Taxis and Ride-Sharing Services
- Maximum amount per transaction
- When use of these services is allowed (particularly in areas where airport shuttles or public transport isn’t practical)
Events and Conferences
- Reimbursement process for registration if it was not pre-paid.
- Process for other event or conference-related expenses, such as meals or things not included in the registration cost
Meals, Travel, and Entertainment
- The maximum reimbursable amount for each breakfast
- The maximum reimbursable amount for each lunch
- The maximum reimbursable amount for each dinner
- Or a daily maximum or per diem
- Personal meal expenses throughout the trip
- Rules for business meals
- Rules for client entertainment expenses, including maximum amounts and what’s allowed
Personal Telephone Use
- The amount of the cell phone bill or percentage that can be reimbursed during the employee’s travel period. Include whether calls made for personal reasons will be covered.
- Whether or not theft of or damage to the personal phone is reimbursable during business travel, and if so, the maximum allowable amount.
Non-Reimbursable Purchases

Keep a list of the things your company won’t reimburse, so people know ahead of time that certain things will come out of pocket at their expense.

Get input for your chief financial officer and the employees who travel most often to determine what’s far to exclude across the board.

It should be clear that your business expense policy will only cover travel-related and business-related expenses and nothing else.

Examples include:
- In-flight purchases
- Childcare or pet boarding
- Costs related to non-employee travel
- Laundry and dry cleaning
- Room service
- Damage to personal vehicles
- Airline ticket change fees
- Traffic violations or parking tickets
- Airline club memberships
- Excess baggage fees
- Premium or luxury car rentals
- Rental car insurance coverage
- Minibar or alcoholic beverages
- Online entertainment, movies, newspapers, etc.
- Clothing and toiletries
Expense Reporting and Reimbursement Process

This section should cover the following:
- The expensing tool to use
- The items that do not need to be added to the expense tool (such as if the trip is booked within the approved booking tool)
- Who to submit reports to
- What to include in the reimbursement requests
- Deadline for request submissions
- Typical processing time for requests
- Policy on personal credit card use
Travel Support, Safety, and Duty of Care

Your policy needs to be something people want to read. It must include information they need to know to familiarize themselves with.

Your staff wants to stay safe while traveling, so including information about their safety and what to do if an emergency arises is key.

Tracking Whereabouts

Let your employees know that when they book with your approved tools or methods, the trip is tracked, so if there is an emergency, you’ll take steps to evacuate them. If you don’t know where they are, you can’t assist.

Include the approved tool’s name, and what they need to do to ensure their trip is tracked if they cannot book within the tool for a valid reason.

Travel Support

Include information about who to call if there are trip changes or cancelations. Provide contact information for the travel support provider, such as email address, phone number, etc.

Emergencies

If an emergency arises, there should be information about who to contact, including your travel insurance policy information. Include employee and vendor contact information for the point of contact in an emergency.

Implementing Your Policy

Customize the template to your needs, and automate it when possible. This ensures employees will always book within policy guidelines at any given time.

Deploy the policy with employees, and collect feedback. Make sure your team is clear on the policy and all its details. Ask them about how easy it is to use the approved tools.

Developing and deploying a travel policy is critical for procurement to keep a close eye on corporate travel expenditures. We hope this makes the process easier for you.

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What’s your goal today?

1. Use PLANERGY to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our Purchase Order Software page to see how PLANERGY can digitize and automate your purchase order process saving you time and money.
Learn about us, and our long history of helping companies just like yours.

2. Download our “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Travel and Expense Policy: What Is It, Example Template, and Best Practices appeared first on Planergy Software.

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Accounts Payable Policy: What Is It, Best Practices, and an Example Template

Clients and results

Cristian Maradiaga

King Ocean

Download a free copy of "Preparing Your AP Department For The Future", to learn:

Accounts Payable Policy: What Is It, Best Practices, and an Example Template

IN THIS ARTICLE

What Is an Accounts Payable Policy?

What Are the Functions of Accounts Payable?

What Is the Typical AP Process?

What Are Internal Controls for Accounts Payable?

Obligation to Pay

Data Entry

Invoice Payment

Fraud Controls

What Is an Accounts Payable Write-Off Policy?

Cancellation of Liability

Expiration of the Contract or Term

Best Practices for Creating an Effective Accounts Payable Policy & Procedures Manual

Fully Document Policies and Procedures

Share and Make Easily Accessible to Appropriate Staff

Review and Update Regularly

Accounts Payable Policy Template

Steps to Create an AP Policy and Procedure Manual

What Should be Included in Your Accounts Payable Policy and Procedures Manual

Department Overview

AP Responsibilities

Procurement Responsibilities

Approval Process for Purchase Orders

Approval Process for Invoices

Invoice Processing

Handling Disputed Invoices

Payment Policies

Early Payment Discount

Handling Lost and Uncashed Checks

Collecting and Managing Vendor Data

Record Retention Policy

Reconciliation

Accounts Payable Best Practices for Your Business

Simplify Workflows with AP Automation Software

Establish Internal Controls for Your Business

Strategically Manage Payments

Negotiate Terms and Prices with Vendors and Suppliers

Keep the Lines of Communication Open

Automate Wherever You Can

Continue to Review AP Accounts Regularly

Having a Current Accounts Payable Policy and Procedure Manual is Essential

What’s your goal today?

1. Use PLANERGY to manage purchasing and accounts payable

2. Download our guide “Preparing Your AP Department For The Future”

3. Learn best practices for purchasing, finance, and more

Related Posts

Travel and Expense Management: What Is It, Challenges and Best Practices

Clients and results

Cristian Maradiaga

King Ocean

Download a free copy of "Indirect Spend Guide", to learn:

Travel and Expense Management: What Is It, Challenges and Best Practices

IN THIS ARTICLE

What Is Travel and Expense Management?

Challenges of Travel and Expense Management

Employee Resistance to Change

Lack of Visibility Into Spend

Manual Processes

Lack of Policy Enforcement

Filing Expense Reports

Dealing with Reimbursements

Fraud and Misuse

Integration with Other Systems

Employee Satisfaction

Benefits of Effective Corporate Travel Management

Cost Savings

Improved Compliance

Increased Efficiency

Improved Visibility

Better Employee Experience

Best Practices for Travel and Expense Management

Create a Central Repository

Establish Policies and Procedures